Wednesday, May 22, 2024

The Fintechs Using Technology To Bolster ESG

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At the Morningstar Investment Conference on May 1, two fintech companies were able to showcase their wealth management solutions.

Propelle, the female focused investment platform helping to build a community for women who want to learn about investment, was one of the winners of the PIMFA WealthTech and Morningstar ESG challenge held last month.

Propelle was set up by Ayesha Ofori, a former Goldman Sachs’ private wealth advisor who worked for many years helping ultra-high net worth individuals.

“I used to work at Goldman Sachs and our clients were incredibly rich, predominantly white men. And it sort of occurred to me one day that in the grand scheme of things, how are we actually making a difference? How are we helping society, the masses, by making the wealthy wealthier?,” she tells Morningstar UK.

“I felt that if I could help people who needed to build wealth, then it would align with my values and purpose. And it was obvious to me that there was a need to focus on women because across the investment management industry, women have been effectively left behind.”

Ofori points to the gender investment gap and the pension gender gap. The numbers emphasised that women were not investing enough to build a future for themselves and their families.

“That’s the whole mission behind Propelle, it is to financially empower women, to help them build the confidence and the knowledge to be able to invest on a regular basis and to build long term sustainable wealth.

As well as allowing women to open ISAs and to choose from a selection of Vanguard funds on the platform, women on Propelle can access an ESG offering too.

“Either they can choose a pure sort of diversified ESG fund, or they will be able to choose various different layers that they can add on. For instance, there may be a climate layer, or a carbon neutral layer. So it’s not just about investing to make money, it is also about trying to make a positive difference in the world as well,” she says.

Using AI for ESG 

Propelle shared the top spot in the ESG challenge with KnowYourFunds, the fintech group using artificial intelligence to ensure that ESG and sustainable finance data are integrated seamlessly into how fund firms operate.

Simon Prest, the co-founder of KnowYourFunds, believes that the platform can help create a service for fund groups who want to avoid greenwashing, as mounting pressure from the FCA calls on funds to be transparent and adhere to the SDRs.

“There is a need for a scalable technological solutions as opposed to what we found out, which is a lot of people are doing stuff manually. And obviously they cannot do that on an ongoing basis. Its periodic and a lot of things slip through the net,” Prest said.

“We have tried to come up with a technological solution that is continuous, more complete and allows people to be able to interrogate their investments, to make sure that they are doing what they say they are doing and to alert them as early as often in the cases where they are not so that can do something about it.”

KnowYourFunds is a cloud-based product with numerous engines which enable the platform to interrogate externally managed funds and fund-of-fund structures.

Prest, who was a former corporate bond and credit derivatives trader, does not come from an ESG background, but with his co-founders, he was able to identify the challenges investors would face to apply ESG data consistently and effectively to their investment processes.

“[Its like] a levelling up tool in a way, you know smaller asset managers and asset owners do not have the resources to hire a team of dedicated ESG analysts. So, we are levelling up from that respect, but then the more we delved into this, we found that even the largest institutions do not necessarily have the technological solutions.”

For Prest, the FCA wants the investment industry to look at ESG risk as any other risk like  foreign exchange or credit risk. But systems have not kept pace with the rate of change. He feels that KnowYourFunds is the solution to ensure that asset managers are adapting to the new regulatory landscape.

“Irrespective of what you think about sustainability and ESG. The regulatory environment that everyone is operating in is now that it has to be overseen and if you are making claims about it you have to be able to substantiate them.”

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